The Link: LINK

The Story: This is a very well written article about the far reaching effects of Circuit City filing for bankruptcy protection and announcing it will liquidate.

The Analysis: It’s difficult to fully understand the extent of the Circuit City pain.  For instance, those 40,000 workers that have lost their job will spend meaningfully less money in their communities than when they were employed.  They’ll be more cost conscious of their grocery bill (Wal-Mart over Ukrops).  They’ll wait to take a vacation, or buy a new car.  They certainly won’t be buying a new house anytime soon (I would guess).  So yes, the CC suppliers, newspapers, etc. will certainly feel a modicum of pain.  But the ancillary businesses that served their employee base will suffer just as much.  They may not be able to pin it directly to this bankruptcy or that one, but they will certainly feel the effects in their revenues.

The Link: LINK

The Story: The German memory chip maker Qimonda filed for bankruptcy protection in a local Munich court yesterday.  The company, which is majority owned by Infineon Technologies AG, sited the precipitous fall in computer memory prices and an inability to obtain favorable credit as reasons for its demise.

The Analysis: So, isn’t this just another major international company filing for bankruptcy?  Don’t we have a few of these every day lately?  Well, yes.  However, Qimonda owns and operates a significant manufacturing facility in Eastern Henrico County.  The facility, which has been in operation since 1997, employed approximately 2,200 Virginia’s.  Qimonda had previously announced that it planned to lay off 1,200 of the 2,200.  With this new announcement, there is no indication of what will happen to the remaining 1,000 employees.

Yesterday, Richmond headquartered Circuit City Stores announced that they will be shutting their stores and liquidating their assets.  We have know for a while that CC was struggling financially, but I think everyone had held out hope that they would be able to find a buyer and turn them around.  Unfortunately, that does not appear to be the case. Over the years, CC has struggled to compete with its brick and mortar rival Best Buy as well as other online merchants.

CC demise will be felt especially hard in the Richmond economy.  CC will obviously shut its Headquarters location and terminate approximately 1,500 employees there.  No package, no severance, just out the door in 60 days.  Across the country, CC will shutter its 567 stores and release the balance of its 30,000 employees.

The closing of the CC Headquarters building will bring more office space to a submarket that is already reeling from the impending departure of MeadWestvaco and Wachovia, as well as the LandAmerica break up.  Conceivably, this 8 million SF suburban market could see a vacancy rate (actual and sublease) of close to 50% in the very near future.  That will be a ton of space for this market to work through over the coming years.

On the upside, If you are a company looking to relocate your headquarters out of an expensive location like NY, Chicago or Boston, Richmond is a very attractive alternative.  Not only does it have a lower cost of living, but it also has a very well educated workforce, a higher quality of life and plenty of (soon to be discounted) headquarters office space.

The next hurdle becomes making sure that Virginia’s General Assembly doesn’t cut the economic development budgets so much that they can’t get out there and attract these tenants.  Altria made the move and others can and will as well.